Populism on the rise

Populism has historically manifested itself in many forms and figures, and as such the term “populism” has numerous definitions.² We define populism as a mass political movement that harnesses “the power of the people” to reject the elite and the status quo. Populism is usually concentrated around a charismatic leader, and often includes advocating for more redistributive economic policies—or even illiberal tendencies to concentrate power in a single individual.

Countries as diverse as Denmark, Poland, Greece, Hungary, the Philippines, and Zambia have recently seen populist politicians or political parties win elected office or gain a significantly larger share of votes than in the past. The number of elected populists in OECD countries has risen steadily since the 1990s, according to analysis by Harvard lecturer and University of Sydney professor Pippa Norris.³ This trend is particularly apparent in Europe, where, according to the 2016 TIMBRO Authoritarian Populism Index, one-fifth of all voters support left- or rightwing populist parties. Even more dramatically, a recent YouGov study of 12 European countries shows that almost half of adults have anti-immigrant, nationalist sentiments. Populism is also growing in Sub-Saharan Africa, where rapid urbanization coupled with poor economic growth and staid political systems has enabled populist politicians from parties such as South Africa’s Economic Freedom Fighters or Zambia’s Patriotic Front to win elections.⁴

Roots of global populism

Multiple factors are driving the current wave of worldwide populism. First and foremost, while the past three decades of globalization have contributed to rising living standards around the world and a net decline in global inequality between countries, they have also resulted in rising inequality within many countries. This growth in inequality has been particularly acute in developed markets, where increased trade and freedom of migration have coupled with rapid technological change to create greater competition and downward wage pressure for low- and mid-skilled workers, while simultaneously increasing economic opportunities for higher-skilled workers.⁵ For example, according to World Bank data the United States saw an 11.4 percent rise in inequality from 1990 to 2011. As a result, populist politicians and their supporters blame globalization for rising economic inequality and lack of opportunities.

Yet, globalization-driven inequality alone does not explain the global rise in populist politics, as highlighted by the rise of populist parties in relatively equitable and prosperous Denmark, Sweden, and Norway. Increased global migration and interaction with other cultures is another driving factor, with globalization having pushed people of different cultures together quickly. A recent Pew Research Center survey, for instance, found that most Europeans believed that Muslim immigrants want to be distinct from their society and that few Europeans believed diversity to be positive for society. In the United Kingdom, a surge in migration in 2014 and 2015 helped make immigration the dominant issue of the Brexit campaign and likely contributed to UK voters choosing to leave the EU.

Simultaneously, the availability of vast amounts of information through pervasive media and telecommunications technologies has made gaps between the wealthy and poor more apparent and hardened people’s ideological stances. As perceptions of inequality rise, so too do sociopolitical tension and instability, as shown in a 2015 National Bureau of Economic Research study.⁶ Social media further contributes to the dissolution of social cohesiveness by creating echo chambers, where people only consume and interact with opinions and voices that resemble their own beliefs. This creates a climate ripe for the grievance-based politics that populists employ to gain support.

More generally, there is a growing perception among populations in both emerging and developed markets of a lack of control over one’s life. Combined with visible instability—such as more widespread terrorist attacks and global commodity price volatility—this has generated a tangible desire for order and strength from their national governments. Populists exploit this desire for order to gain favor with the broader population. For instance, after a series of terrorist attacks in recent months, former French President Nicolas Sarkozy published a book arguing that Islam is a threat to the French way of life.⁷ And in his US presidential campaign, Donald Trump has repeatedly highlighted his focus on “law and order.”

In Europe, political convergence has also aided the rise of populism. In contrast to the United States, where the main political parties have become more polarized, European political parties have moved closer to each other ideologically over the past 20 years. This move to the center has opened up space on the political extremes in many countries, allowing populists to portray themselves as change candidates ready to take on an entrenched elite. Center-left and center-right parties are either shedding votes or being pulled to the extremes.

The backlash against political parties is not just a European phenomenon. Political parties are among the least trusted institutions globally. One indicator of this is Transparency International’s most recent Global Corruption Barometer, which shows that people perceive political parties as the most corrupt institutions globally. This lack of trust is clearly evident in voters’ disdain for the party elites on both sides of the aisle in the United States. And in countries where political parties are less firmly entrenched and corruption more prevalent, such as some Eastern European states and the Philippines, populists have been able to successfully campaign on platforms of good governance—even if their ideological platforms are similar to established parties.

The interaction between all of these factors is fueling the current global populist wave. Many people are unsatisfied with their lot in life due to rising inequality, blaming traditional political parties, global trade, and immigrants for their woes. The policy convergence among elites traditionally on opposite sides of the political spectrum has motivated people to support outsider, populist candidates who promise to take back control of their countries from the globalized system. And the proliferation of media outlets, including social media, has created closed environments wherein people only consume news that supports their positions—thus legitimizing those views and hardening ideological divisions within society.

Outlook

The increasing popularity of populist politicians is not just a concern for traditional politicians and mainstream political parties. Businesses are also affected by the rising storm of populism. As figure 2 illustrates, nontariff barriers initiated by World Trade Organization (WTO) member states have increased significantly in recent years, reflecting greater public pressure on governments for protectionism. Indeed, the WTO recently reported that in June 2016 the application of new trade restrictions by G20 states reached its highest level since the WTO began monitoring them in 2009.